Introduction:

Entirely export oriented Ready-Made Garments (RMG) sector of Bangladesh has experienced a noteworthy enhancement since its commencement in last half of 1970s. Strangely enough, though this major industry is now totally based on private entrepreneurial efforts, its inauguration was rooted into an export consignment of Shirt which was done by Trading Corporation of Bangladesh (TCB), the state operated trading agency, in mid ‘70s. The export consignment held with some East-European countries. However, the entrance of private entrepreneurs in this sector gifted it with a tremendous boost.

Background:

Reformed domestic policy and the international Multi-Fiber Agreement (MFA) are the key procedures that ameliorated the condition of Bangladeshi RMG export (Quddus and Rashid, 2000).

In the decade of ‘80s, Bangladesh adopted a modification in national economic policy to run its economy under the tutelage of World Bank and International Monetary Fund (IMF). Establishment of Export Processing Zones (EPZ) channeled foreign direct investment in this sector (Bhattacharya, et al., 2001, p.2-26). Money-spinning facilities like cash assistance, income tax rebate, freight and power rate rebate, tax holiday, loans at lower rate, provision of back to back Letter of Credit (LC), guarantee scheme for export credit, decreasing interest rate in export credit, reducing harbor charges, bond facilities for warehouse, duty free imports of raw materials and productive machineries, were offered to export oriented RMG industries (Mayumi, 2004)

The MFA was an agreement of World Trade Organization (WTO), done in 1974 which set quotas for export of textile and garments related products from the developing countries (Rahman, 2004). Under this agreement, USA and Canada, the then largest RMG importers, imposed quota restrictions and maintained a limit in importing products from countries such as Hong Kong, Singapore, Thailand, South Korea, Sri-Lanka, India, Taiwan, Malaysia and Indonesia. Moreover, some countries had also major internal problems, like, sudden increase in labor cost in Sri-Lanka (Siddiqui, 2003). As a result, for minimizing the cost, the importers started looking for alternative sources and Bangladesh became a lucrative source for them for facilities like low labor cost and large export quotas (Wigg, 1990, p.154-159). Bangladesh received preferential treatment by USA and European Union, as a less developed country. Paradoxically, within 1985, Bangladesh appeared as a giant in international apparel sector and became a major competitor for the suppliers in USA, Canadian and European market. Thus, the bed rock of this major industry of Bangladesh was set down and slowly & gradually this industry has become the core of the national economy. Later, RMG sector also received other facilities like Generalized System of Preferences (GSP) from USA and UK.

Major problems of RMG industry of Bangladesh:

In spite of being the main source of the money stream in internal economy of Bangladesh, the Ready-Made Garments sector is in continuous threat by some major and crucial factors. As a result, the whole sector is in risk and in a volatile situation which may disgracefully collapse the whole sector as well as the country’s economy. These problems or threats can be categorized in following sections:

1. Critical political condition